Brookfield Re expects to pass $100bn mark for insurance assets
Brookfield Reinsurance expects to have over $100 billion in insurance assets following the closing of its purchases of American Equity Investment Life and Argo Group.
Brookfield made the forecast as it released its second quarter results of $360 million, up from $25 million in the same quarter a year ago.
Bermuda-based Brookfield Re, which was spun off from its eponymous parent company in 2020, said it expects to increase new business originations to $10 billion annually once its purchases of AEL and Argo are complete.
Chief executive officer Sachin Shah said: “The strength of our second quarter results are underpinned by significant investment portfolio redeployment and the execution of strategic initiatives post the acquisition of American National one year ago.
“Following the close of our announced transactions, our total insurance assets will be over $100 billion, representing an important milestone in the continued growth of a diversified insurance business of scale.”
The company said it originated over $3 billion in annuity sales in the quarter, including $650 million of flow business within existing reinsurance treaties. It also closed 25 pension risk transfer transactions, representing approximately $530 million in premiums.
Following the completion of the AEL transaction, Brookfield Re said it expects to “have the foundation to become a leading U.S. annuity originator”.
“Through product and distribution synergies, we expect to increase new business origination to over $10 billion of policies in aggregate annually.”
The company expects the $1.1 billion purchase of Bermuda-based Argo Group to close in the second half of 2023.
It added: Upon closing of the Argo Group and AEL Brookfield transactions, we will have deployed approximately $10 billion of capital within Brookfield Reinsurance since its inception, and our total insurance assets are expected to exceed $100 billion.
“By leveraging Brookfield’s investment capabilities, these assets will be redeployed at attractive risk-adjusted returns, driving increasing spread earnings and delivering significant returns to our shareholders.”
Brookfield Re has come under criticism from US trade union Unite Here for shifting its portfolio from supposedly safer easier to sell securities to “complex and illiquid securities, including commercial real estate debt and private credit”.
The company said second quarter results were driven by contributions from American National, as well as higher net investment income from reinsurance treaties closed in late 2021.
“We have made significant progress over the last twelve months in redeploying these assets into higher yielding investment strategies sourced through Brookfield and Oaktree,” the company said.
“We recorded net income of $360 million (2022 - net income of $25 million) for the three months ended June 30, 2023, as a result of a unrealized mark-to-market gains on our investments and insurance reserves. Net income also continues to benefit from the repositioning of assets across our insurance accounts into higher yielding investments.
“Today, we have approximately $1 billion of corporate liquidity, with an additional $22 billion of cash and liquid assets within our insurance portfolios. Amidst a volatile market backdrop in the first half of 2023, we continue to find opportunities to deploy capital for deep value and fund our strong pipeline of investments.
“Our strong liquidity positions us well to support the redeployment of our investment portfolios, while also remaining well capitalized to meet the needs of our policyholders and clients.”
Net premiums and other policy revenue declined in the quarter from $1.23 billion to $1.2 billion while net investment income more than doubled to $525 million from $238 million. Investment gains were $313 million compared to a loss of $190 million in 2022.
Benefits and claims edged down from $1.15 billion to $1.13 billion while operating expenses doubled to $186 million from $75 million.
